Introduction
The Constitution of India establishes a unique federal system often described as “quasi-federal” or “federal with a strong unitary bias.” Unlike classical federations such as the United States, India’s federalism balances the need for a strong Centre with the autonomy of States. This structure was shaped by historical circumstances such as the Partition, the need for national integration, administrative convenience, and economic unity.
Dr. B.R. Ambedkar famously said that Indian federalism is “a federation in normal times and unitary in emergencies.”
The division of powers between the Union and the States is reflected in:
- Constitutionally demarcated legislative powers
- Distribution of executive/administrative authority
- Allocation of financial resources and taxation powers
- Mechanisms for coordination and dispute resolution
Articles 245–263 (legislative & administrative relations) and 268–293 (financial relations) form the backbone of these provisions.
The following sections provide an in-depth understanding of India’s Centre–State Relations, classified into Legislative, Administrative, and Financial, along with relevant case laws and practical implications.
1. CENTRE–STATE RELATIONS: AN OVERVIEW
Centre–State relations in India are broadly classified into:
1. Legislative Relations (Art. 245–255)
2. Administrative Relations (Art. 256–263)
3. Financial Relations (Art. 268–293)
These relations ensure cooperative governance while maintaining national integrity. The Union holds greater authority in critical matters such as defence, foreign affairs, communication, and monetary policy, while States operate in areas like public order, police, agriculture, health, and local governance.
Several constitutional bodies also influence Centre–State relations, such as:
- Finance Commission (Art. 280)
- Inter-State Council (Art. 263)
- GST Council (Art. 279A)
- National Development Council
- NITI Aayog
The overarching philosophy is ‘cooperative federalism’, though at times the Centre exercises ‘coercive federalism’ through mechanisms like emergency powers or the use of Article 356.
2. LEGISLATIVE RELATIONS (ARTICLES 245–255)
Legislative relations deal with the distribution of law-making powers between the Union and the States.
A. Territorial Jurisdiction (Art. 245)
- Parliament can legislate for whole or any part of India.
- States can legislate for their own territories only.
- Parliament can legislate for extraterritorial operations.
B. Distribution of Subjects – Three Lists (Schedule VII)
The Constitution follows a triple-list system similar to the Canadian model.
i. Union List (List I – 97 subjects)
Parliament has exclusive power. Includes:
- Defence, war, atomic energy
- Foreign affairs
- Railways, national highways
- Currency, banking, RBI
- Citizenship
- Inter-State trade
- Income tax (except agricultural income)
Union’s dominance in crucial areas maintains national unity.
ii. State List (List II – 66 subjects)
States have exclusive authority over:
- Police
- Public order
- Agriculture
- Public health
- Land revenue
- Betting and gambling
- Local government
However, the State List is not fully autonomous because Parliament can legislate on these subjects in certain conditions.
iii. Concurrent List (List III – 47 subjects)
Both Parliament and State Legislatures can legislate. Includes:
- Criminal law, criminal procedure
- Marriage/divorce, adoption
- Bankruptcy
- Education
- Forests
- Trade unions
- Electricity
- Social security
In case of conflict, Union law prevails (Art. 254), except when the State law has Presidential assent.
C. Parliamentary Power Over State Subjects
Parliament can legislate on State List subjects under:
(i) National Interest (Art. 249)
- Rajya Sabha can pass a resolution (2/3rd majority) enabling Parliament to legislate on State List subjects.
(ii) During National Emergency (Art. 250)
- Parliament can legislate on any State List subject.
(iii) When two or more States request (Art. 252)
- Parliament can legislate for those States; other States may adopt later.
(iv) To implement international agreements (Art. 253)
(v) President’s Rule (Art. 356)
- Parliament can legislate for States under President’s Rule.
D. Residuary Powers (Art. 248)
- Any matter not listed in the three lists rests with Parliament.
- This is similar to the Canadian federal system.
- Important for subjects like cyber laws, space laws, digital currencies, etc.
E. Doctrine of Repugnancy (Art. 254)
If a State law conflicts with a Union law on a Concurrent List subject:
- Union law prevails
- State law becomes void to the extent of repugnancy
Exception: State law receives Presidential assent
Important Case Laws on Legislative Relations
1. State of West Bengal v. Union of India (1963)
- Held India is not strictly federal; Union can acquire State property.
2. S.R. Bommai v. Union of India (1994)
- Strengthened cooperative federalism; judicial review of Article 356.
3. State of Kerala v. Mar Appraem Kuri Co. (2012)
- Union law prevails over State law in Concurrent subjects.
4. Union of India v. H.S. Dhillon (1972)
- Clarified scope of residuary powers under Article 248.
3. ADMINISTRATIVE RELATIONS (ARTICLES 256–263)
Administrative relations govern executive powers, cooperation, and coordination between the Centre and States.
A. Executive Power (Art. 73 & 162)
- Union’s executive power extends to matters on which Parliament can legislate.
- State’s executive power extends to matters on which the State Legislature can legislate.
- Union power prevails in cases of conflict.
B. Centre’s Control Over States
1. Directions by the Union (Art. 256 & 257)
States must comply with Union laws and cannot impede Union executive power.
Centre may issue directions for:
- Construction and maintenance of highways
- Railways
- Communication systems
- Protection of railway lines
- Public health for national programs
2. Delegation of Union Functions (Art. 258)
President may entrust Union responsibilities to States.
3. All-India Services (Art. 312)
Services like IAS, IPS, IFoS ensure uniform administrative structure.
All-India Services are considered a key feature of Indian federalism with strong unitary bias.
4. Inter-State Water Disputes (Art. 262)
Parliament may set up tribunals (e.g., Cauvery Tribunal).
SC’s jurisdiction can be excluded.
5. Inter-State Council (Art. 263)
Created by Presidential order on recommendation of Sarkaria Commission.
Functions include:
- Coordination
- Dispute resolution
- Policy discussions
6. Full Faith and Credit Clause (Art. 261)
Public acts, records, judicial proceedings of one State must be recognized by others.
7. Emergency Provisions
i. National Emergency (Art. 352)
- Union assumes wider control.
ii. State Emergency (Art. 356)
- Used to take over State administration.
iii. Financial Emergency (Art. 360)
- Centre gains sweeping financial powers.
Case Laws on Administrative Relations
1. S.R. Bommai v. Union of India (1994)
- Laid down safeguards against misuse of Article 356.
2. Re Berubari Union (1960)
- Explained Union–State role in administrative decisions relating to territory.
4. FINANCIAL RELATIONS (ARTICLES 268–293)
Financial relations define the distribution of taxation powers, grants, borrowing powers, and the role of the Finance Commission.
A. Distribution of Taxation Powers
Taxation powers are clearly divided:
i. Union Powers
Union List taxes include:
- Income tax (except agricultural income)
- Customs duty
- Excise duty on Union-made goods
- Corporation tax
- Service tax (pre-GST)
- GST (as per Art. 246A)
- Central excise
- Taxes on international transactions
ii. State Powers
State List taxes include:
- State GST share
- Excise on liquor
- Land revenue
- Stamp duty (certain matters)
- Vehicle tax
- Agricultural income tax
- Electricity duty
- Taxes on betting & gambling
States lost VAT and entry tax after GST, leading to revenue dependence on the Centre.
B. Division of Revenue
Taxes are divided as:
i. Taxes Levied by Union but Collected by States (Art. 268)
ii. Taxes Levied and Collected by Union but Assigned to States (Art. 269)
- E.g., interstate trade taxes (pre-GST)
iii. GST Distribution (Art. 246A & 279A)
- GST Council regulates GST; revenue-sharing formula in place.
iv. Grants-in-aid (Art. 275)
- Given to need-based States.
v. Loans to States (Art. 293)
- States can borrow but require Union consent if indebted to the Centre.
C. Finance Commission (Art. 280)
Constituted every five years.
Functions:
- Distribution of tax revenues
- Grants-in-aid
- Measures to augment State revenues
- Improve fiscal federalism
Finance Commissions ensure equity, balancing needs, capacity, population, and performance.
Notable Finance Commissions:
- 14th FC – Increased State share to 42%
- 15th FC – Slightly reduced to 41%
D. Goods and Services Tax (GST) and Fiscal Federalism
GST (2017) is a major reform:
- Merged central & state indirect taxes
- Introduced GST Council (Art. 279A)
- Ensures cooperative financial decision-making
- Compensation act assured States 14% revenue growth (ended in 2022)
GST Council decisions were held not binding but recommended in Union of India v. Mohit Minerals (2022), reinforcing cooperative federalism.
E. Emergency Financial Powers (Art. 360)
During financial emergency:
- Centre can issue binding directions
- Salaries of government officials may be reduced
- States lose financial autonomy
Although never declared in India, the provision gives strong centralizing powers.
Important Case Laws on Financial Relations
1. Union of India v. Harbhajan Singh Dhillon (1972)
- Residuary taxation is Union’s power.
2. State of West Bengal v. Union of India (1963)
- States cannot claim sovereignty in taxation disputes with Centre.
3. Mohit Minerals v. Union of India (2022)
- GST Council decisions not binding; strengthens cooperative federalism.
EVOLUTION OF FEDERALISM IN INDIA
Centre–State relations have evolved over time through commissions:
1. Sarkaria Commission (1983)
Recommended:
- Strengthening Inter-State Council
- Restricting misuse of President’s Rule
- More autonomy in State List subjects
2. Punchhi Commission (2007)
Suggested:
- Clearer emergency provisions
- Limit Centre’s use of Article 356
- Fiscal autonomy to States
- Cooperative federalism in taxation
MODERN TRENDS IN INDIAN FEDERALISM
1. Cooperative Federalism
- Seen in NITI Aayog, GST Council.
2. Competitive Federalism
- States compete to attract investment.
3. Judicial Federalism
- Courts act as referees in Centre–State disputes.
4. Political Federalism
- Regional parties increase States’ bargaining power.
5. Fiscal Federalism
- States seek more financial independence.
CONCLUSION
India’s federal structure is neither purely federal nor purely unitary. It is a carefully designed hybrid system that attempts to balance national unity with regional autonomy.
Legislative relations show a strong Union bias but allow State participation.
Administrative relations emphasize cooperation but give ultimate control to the Centre.
Financial relations remain the most debated due to States’ dependence on Union transfers.
Despite tensions, India’s federalism has largely succeeded due to constitutional mechanisms, judicial oversight, and political maturity.
The future of Indian federalism depends on:
- Strengthening fiscal autonomy
- Transparent GST compensation
- Respect for political diversity
- Empowering Inter-State institutions
India’s federalism represents a dynamic balance between unity and diversity, central authority and local autonomy, making it one of the most flexible and resilient federal systems in the world.
